Cost segregation services: What are your options? 

Cost segregation studies can provide immense savings for your real estate investments by breaking down the components within your property for faster depreciation than the property as a whole. Most people think you need to pay expensive cost segregation specialists and engineers to complete a study, but that’s not your only option. 

In this article, we’ll discuss the three main options for cost segregation studies and break down the pros and cons of each. 

Option 1: Cost segregation service providers

The most common method for cost segregation studies is to go through a consultant or service provider. This is typically comprised of a team of engineers and CPAs. The engineers conduct an on-site study to take precise measurements for all of your building components while the CPAs determine which of those components are eligible for a shorter depreciation period of either 5, 7, or 15 years. 

The studies you get from these specialists and consultants are generally complete and leave no stone unturned, but they can be costly and time-consuming. Additionally, there is no guaranteed ROI on an expensive cost segregation study, so you may be waiting for several years to get your investment back through tax savings, depending on the outcome of your study. 

Option 2: DIY cost segregation

Do-it-yourself (DIY) cost segregation still requires working with a team to complete the study, but instead of hiring a team of engineers to collect information on your property, you do it yourself. In this method, you take extensive photos, videos, and measurements of your property. You also look up all the other details you need on property values, improvements, etc. Then, you provide this information to a CPA who produces the study for you.

This method can dramatically reduce the cost of your study, but it still has the CPA’s cost associated with it. If you take your measurements correctly and provide good information, your study should be IRS compliant, but it is less guaranteed than working with experts to gather that information. 

Option 3: Automated cost segregation 

While many commercial properties will require CPA involvement because of the complexity involved, some don’t. For most rental properties, you can actually run an automated cost segregation study yourself. 

Tools like that of our sister company, Rental Property Refund, allow you to simply enter information on your property into an automated software system. Then, an automated cost segregation report is produced. The report is IRS-compliant and accurate. For simpler properties such as rental units, this is the most cost-effective way to achieve tax savings through accelerated depreciation.

An alternative cost segregation service provider

We at Commercial Property Refund fit within the category of cost-segregation service providers (option 1). However, we operate with an alternative model that helps save you money and time. 

While we provide a team of experts to guide your study, we utilize a proprietary automated software system to streamline your study. Think of it as a mix of option 1 and option 3 from above. This gives you a cheaper option to complete a study with a higher ROI and a faster timeline for completion. 

For smaller commercial property owners, this makes the benefits of cost segregation more affordable and accessible. Traditional cost segregation service providers may only be affordable to larger organizations, but Commercial Property Refund changes that. 

Which cost segregation service option is best for you?

The best cost segregation service option for you will depend on what type of property you own and what your preferences are. 

For rental property owners, it makes the most sense to use an automated solution like Rental Property Refund. This is the cheapest and fastest option for less complex properties that don’t require a CPA to get involved. 

For commercial property owners, you’ll likely want to go with a service provider to ensure that you have your ducks in a row. However, you can choose to go with an alternative service like Commercial Property Refund, which combines service and automation for a faster study. This gives you the CPA involvement you need to make sure your study is IRS-compliant while still taking advantage of quick turnaround times.

Interested in getting started on your cost segregation study? Check out our commercial property refund calculator for a free estimate of how much you can save. 

About Author

Richard Bourgault

Graduating from Georgia Tech with a degree in Electrical Engineering, Richard has gained over a decade of expereince in Cost Segregation coupled with software UX.

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